IN INTERNATIONAL

BUSINESS
 Learning Outcomes

Students will be able to :

1.Understand the various issues in International business.

2. Examine various issues international Business.

3. Apply various ethical in International Business.

Introduction

 Ethics - accepted principles of right or wrong that govern the

conduct of a person, the members of a profession, or the
actions of an organization
 Business ethics are the accepted principles of right or
wrong governing the conduct of business people
 Ethical strategy is a strategy, or course of action, that does
not violate these accepted principles
Importance of ethics in
international business
 First of all,
Ethical behavior combined with skills and professionalism is
able to ensure sustainable development, rather than a short-
term profit, which brings disastrous results after a certain period
of time. Ethical behavior ensures awareness and concern for
the future and for the right way of action in each particular
situation.
 Secondly,
Ethical behavior establishes a healthy and pleasant cooperation
climate for all the parties involved in a deal, making them feel
comfortable with each other.
 Thirdly,
Acting in accordance with moral values is crucial for deserving
clients' attention and support and achieving a significant
competitive advantage in a particular market segment.
Ethical Issues in International
Business
 The most common ethical issues in business involve
 employment practices
 human rights
 environmental regulations
 corruption
 the moral obligation of multinational companies
• Employment Practices:
If work conditions in a host nation are
clearly inferior to those in a multinational’s
home nation, should companies apply:
- Home country standards
- Host country standards
- Something in between

Human Rights:
In developed countries, basic human
rights such as freedom of association,
freedom of speech, freedom of assembly,
and freedom of movement, are taken for
granted
In other countries, these rights may not
exist
 Environmental Pollution:
Ethical issues arise when environmental regulations in
host nations are far inferior to those in the home nation.
Environmental questions take on added importance
because some parts of the environment are a public
good that no one owns, but anyone can despoil.
The tragedy of the commons occurs when a resource
held in common by all, but owned by no one, is overused
by individuals, resulting in its degradation.

Corruption

In the United States, the Foreign Corrupt

Practices Act outlawed the practice of paying
bribes to foreign government officials in
order to gain business.
The Convention on Combating Bribery of
Foreign Public Officials in International
Business Transactions adopted by the
Organization for Economic Cooperation and
Development (OECD) obliges member
states to make the bribery of foreign public
officials a criminal offense
 Moral Obligations:
Social responsibility refers to the idea that business people should
take the social consequences of economic actions into account
when making business decisions, and that there should be a
presumption in favor of decisions that have both good economic
and good social consequences .
People argue that businesses need to recognize their noblesse
oblige and give something back to the societies that have made
their success possible.

BP supports this notion, and has made it company policy to give back
to the community. For example, in Algeria the company built two
desalination plants to provide drinking water to residents in Salah.
 Ethical Dilemmas

 Managers often face situations where the appropriate course of

action is not clear
 Situations in which none of the available alternatives
seems ethically acceptable
 They exist because real world decisions are complex, difficult to
frame, and involve various consequences that are difficult to
quantify.
The Roots of Ethical/ Unethical
Behavior

DECISION
PERSONAL
MAKING
ETHICS
PROCESS

UNREALISTIC
PERFORMANCE
LEADERSHIP
EXPECTATIONS

SOCIETAL
ORGANISATION ETHICAL CULTURE
CULTURE BEHAVIOUR
Legal foundations of ethical
behavior
Laws varies from country to country as moral values varies from
country to country.
EXTRATERRITORIALITY:
Home country governments may impose domestic legal and
ethical practices on the foreign subsidiaries of companies
headquartered in their jurisdictions.

LEGAL JUSTIFICATION THEORY:

An individual or a company can do anything that isn't illegal.
Pro: The law is a good basis for ethical behavior as it embodies
cultural values
Con: legal justification for behavior may not be
sufficient because not everything that is unethical is illegal.
Ethics and
Corporate
Bribery
Corruption & bribery

 Corruption is defined by the World Bank (2005) as ‘the extent to

which public power is exercised for private gain, including petty
and grand forms of corruption, as well as “capture” of the state
by elites and private interests.’
 Corporate corruption generally takes two forms: engaging in
bribe-making, usually as a supplier of bribes, and violations of
ethical and professional standards with the intent to deceive or
defraud investors. With respect to bribes, corporate corruption
could consist of a representative of the firm receiving bribes in
order to make a decision advantageous to the bribe-maker, or
as a bribe-giver, either to another private party or to a
representative of a domestic or foreign government.
Causes of corruption

 Personal
 Personal greed
 Decline of personal ethical sensitivity,
 No sense of service when working
in public or private institutions
 Low awareness or lack of courage
to
denounce corrupt behavior
 Cultural
 Cultural environments that
condone corruption
 Lack of transparency,
especially at
the institutional level
 Institutional
 Regulations and inefficient controls.
 Slow judicial processes.
 Organizational
 Lack of moral criteria in promotions
Downplaying or reacting mildly to
corruption charges
Corruption in the world
ETHICS AND
ENVIRONMENT
SUSTAINABILITY

Sustainability means meeting the needs of the

present without compromising the ability of
future generations to meet their own needs
while taking into account what’s best for both
people and environment
GLOBAL WARMING AND THE
KYOTO PROTOCOL

 At the core of the international treaty called

the Kyoto Protocol is the theory that global
warming is a result of an increase in carbon
dioxide
 If carbon dioxide emissions are not
reduced and controlled , rising temperature
could have catastrophic consequences
 THE KYOTO PROTOCOL

 It was an extension of the UN Framework Convention on

Climate Change of 1994
 It was signed in 1997 to require countries to cut their
green house gas emissions to 5.2 percent below 1990
levels between 2008 and 2012
 By June 2007, 175 nations and regional economic
organisations had ratified the protocol
 The US (25%), initially signed the agreement but
withdrew in 2001
 NATIONAL AND REGIONAL
INITIATIVES
 Reduce emissions or buy credits from
companies that have reduced emissions
below target levels
 MNE’s were forced to reconsider their l
globa
strategies
 The EU has set a target of an 8 percent
reduction from 1990 levels
 The Germans set a target of 21 percent
 COMPANY-
SPECIFIC
 INITIATIVES
The companies need to face the task of adapting to different
standards in different countries
 The legal approach to responsible corporate behaviour says
an MNE can settle for operating in accord with local laws
 Ethical approach, urges companies to go beyond the law to
do whatever is necessary and economically feasible to
reduce green house gas emissions
ETHICAL DILEMMAS D
AN BUSINESS
PRACTICES
 Industry specific
 Deal with issues that cross
industries- To demonstrate how
companies have to examine their
ethical conduct as they spread
internationally
 ETHICAL DILEMMAS AND
THE PHARMACEUTICAL
INDUSTRY
 GlaxoSmithKline(GSK)
 14.5% of revenues on R&D
 Sell drugs at a high price
 Patent expires, the drug becomes
generic
 Protected by U.S patent
 ETHICAL DIMENSIONS OF
LABOUR CONDITIONS
Individual investors Consumers

Corporate
Pressures for
Media investors(eg-
ethical behavior pension
with respect to funds
workers
Trade unions
NGOs
Governments
 OBJECTIVES OF ETHICAL
TRADING INITIATIVE
 Employment is freely chosen
 Freedom of association and the right
to collective bargaining are respected
 Working conditions are safe and
hygienic
 Child labour shall not be used
Living wages are paid
Working hours are not excessive
No discrimination is practiced
Regular employment is provided
No harsh or inhumane treatment is
allowed
 CHILD LABOR
 There are two arguments for use of children
in Indian carpet industry
*There were better suited than adults
*If they weren’t employed, they’d be
even
/worse off
*In 1990s Bangladesh was pressured to stop
employing child workers
*ILO guidelines
What MNEs Can & Can’t Do

 Swedish retailer IKEA

*Helped working mothers
*Bridge schools
 In Thailand, the law permits people to work
84 hours a week in seven 12 hour shifts
*Nike instituted a maximum workweek of 60
hours
 Improvement in Chinese labour practices
 CORPORATE CODE OF
ETHICS
Motivations for Corporate responsibility
 Unethical and irresponsible behavior can result in legal
headaches
 Customer actions such as boycotts
 Unethical behavior can affect employee morale
 Bad publicity is going to cost the sales
 Developing a code of conduct

 External code of conduct is a set of

“guidelines, recommendations and
rules issued by entities within society
with the intent of affect the behavior of
international business entities within
society in order to enhance corporate
responsibility

 Internal code of conduct

 What Makes a Good
Internal Code of Conduct ?
 It sets global policies with which everyone
working anywhere for the company must comply
 It communicates company policies not only to all
employees but to all suppliers and sub-contractors as
well
 It ensure that the policies laid out in the code
are carried out
 It reports the results to external stakeholders